The Duncan Banner
A Duncan oilman, his two sons and a financial officer are implicated in a series of questionable oil-field investment ventures in which more than $5 million is unaccounted for, court records show.
The accusations against Jimmy W. Gray, his two sons and a chief financial officer for five oil companies connected to the family are revealed in an affidavit filed by a court-appointed receiver.
No criminal charges have been filed and at least one attorney who has represented the Gray family in the past denied any wrongdoing has been committed, court records show.
Even so, a bankruptcy judge on Feb. 19 rejected a request for bankruptcy protection by the Gray family oil interests. U.S. Bankruptcy Judge Sarah A. Hall has retained jurisdiction over the company’s questionable financial transactions.
Those transactions have been scrutinized by court-appointed receiver L. Vance Brown, an Oklahoma City attorney, and other lawyers who spent nearly 300 hours sorting through thousands of business records associated with the Gray family’s oil ventures.
“The simple story is they raised a whole lot of money and spent very little of it drilling for oil and gas,” Brown said in an interview with The Banner.
About $5.7 million cannot be accounted for, records show.
“I’m going to be looking for that money,” Brown said.
Jimmy W. Gray, patriarch of the family, his sons Greg and Michael, and Lance Bowman, chief financial officer for five of the companies under suspicion, either could not be reached or declined comment on the investigation.
“I don’t want to talk about it,” said Michael Gray.
Bowman said, “I’m outta there. I don’t have anything to say.”
The court-appointed receiver’s affidavit alleges Jimmy Gray and one or more of his sons promoted oil and gas drilling ventures to non-industry investors during a two-year period, then sold nearly all of the company’s assets in 2011 without telling investors or giving them any sale proceeds.
The assets of that company, known as Jasmine, were then taken over by a different company called Oklahoma Energy Exchange (OEE) in order to avoid regulators in Pennsylvania and Wisconsin, which had consent orders with Jimmy Gray to stop illegally selling unregistered securities, according to the court-appointed receiver’s affidavit.
OEE then raised about $5.7 million to acquire oil and gas leaseholds in Stephens County, where 91 percent of the money was supposed to be spent to buy leases selected with “proprietary seismic data owned by Jimmy Gray,” documents state.
The seismic data apparently was phony but was “sold” to two of Jimmy Gray’s companies to swindle investors, in the opinion of the court-appointed receiver.
“In actuality, OEE spent $256,020.27, or approximately 4.5 percent of the invested capital to acquire leases,” the affidavit states. “The remaining money was used to fund the purchase of a drilling rig; to purchase various trucks and vehicles used by the principals and their family members; to purchase real property for family members; and/or was simply misappropriated by the principals, Jimmy Gray and Greg Gray,” the court affidavit stated.
OEE’s transactions included 10 checks totaling $69,000 payable to Greg Gray.
“Jimmy Gray then forged Greg Gray’s signature, endorsed and cashed the checks ... Jimmy Gray blamed Greg Gray for absconding with OEE’s cash, but the records the Receiver reviewed demonstrate and document that such statements by Jimmy Gray were misleading. It further appears that Jimmy Gray, who has outstanding federal and state tax liens against him in excess of $1 million, intended to avoid income tax obligations on money he received from OEE by claiming the money was paid to Greg Gray.”
Jimmy and Greg Gray did not dispute they used illegal means to attract investors and that promoters received undisclosed 30 percent commissions despite assurances to investors that no commissions would be paid on money raised, documents state.
Most of OEE’s financial records are missing or destroyed, Brown wrote in his court affidavit. Jimmy Gray and Greg Gray blame each other for the missing records and the missing $5 million in investors’ money, Brown wrote.
OEE was shut down in July 2012 and its remaining cash was transferred to a new company, Gates Oil & Gas, Ltd., which was managed by Jimmy Gray and Bowman and which used the same illegal investor promotional activities, court documents say.
It was the Gates company that failed to win bankruptcy protection from creditors last month.
“In the opinion of the receiver, Gates was formed for the purpose of separating itself and its principals from both OEE and Jasmine in order to effectively start with a ‘clean slate’ and continue ‘business as usual.’ The purpose being to continue to solicit funds from unwitting investors to enable a continuous stream of investor funds in the face of substantial financial improprieties and mismanagement by the principals of OEE and Jasmine,” the Receiver’s affidavit concluded.
The court-appointed receiver wrote that the U.S. Attorney should review bank records of OEE to determine if criminal charges should be filed and that the Gates company misappropriated between $1.3 and $1.9 million of invested funds.
Moreover, more than $1.6 million of investor money “have been distributed to Jimmy Gray, Greg Gray and/or, to a lesser degree, Lance Bowman and other insiders, in the past 24 months,” the receiver’s report said.
Despite the legal turmoil, Gates Oil & Gas, LTD maintains a company blog on the Internet, where it promotes the oil patch roots of the Jimmy Gray, one of his sons and their erstwhile chief financial officer.
“Jimmy W. Gray was born in Duncan, Okla., in the ‘Heart of Oil’ Country. His is the third generation to live on the family’s homestead. When growing up, Jimmy literally had Halliburton Industries as a neighbor, which piqued his interest in the oil industry. Jimmy drilled and completed his first well at the age of 23...
“Michael K. Gray, was born in Duncan, Oklahoma during the oil boom of 1964. Throughout his high school years, he worked as a roustabout, pumper and roughneck...
“Lance Bowman has over 26 years of experience in the financial services and banking industry with 10 years being an Executive Manager...”